Knowns & Unknowns

Funding for business - Who will feel the squeeze?
The cost of the green
‘stealth tax’

The opportunities and risks in the Government's strategy to private business We look at the new realities in Regional Development Support See the costs and which businesses will be affected

Companies calculate the cost of the green 'stealth tax'

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A storm is brewing over the Chancellor’s so-called “environmental stealth tax”. Some £3.5bn being raised from April 2012 from companies under the Carbon Reduction Commitment scheme will now be pocketed by the Government instead of being recycled to businesses with good energy efficiency records.

Doing their sums
The Environment Agency says it’s working with the Government ‘to understand the implications of the changes’ and will provide more information when its officials have done their sums.

5,000 companies may be hit
Meanwhile, others claim some 5,000 medium-sized companies with annual bills of more than £500,000 will have to pay more. A business with an average annual gas and power bill of £1m could face an extra £76,000 in the first year.

And it’s mandatory
The unexpected change is being made to a mandatory energy efficiency scheme, administered by the Environment Agency to reduce carbon dioxide emissions and encourage environmental change among large power users.

No cash back now
The understanding was that businesses would make upfront payments to the Government with the money being returned on respective emission reductions. That cash-back incentive has now gone.

Cost to businesses
Retailers calculate this will cost store chains upwards of £20m a year. Another wider calculation is that the change could add 10% to the energy bills of universities, hospitals and shops.

Now the good news
The move takes the shine off an otherwise positive series of ‘green’ measures in the Comprehensive Spending Review. These include:

  • £1bn for a new investment bank to dispense funds to low-carbon infrastructure projects;
  • up to £1bn for an energy plant to demonstrate carbon capture and storage technology;
  • £200m for renewable energy, mainly devoted to offshore wind and the ports infrastructure;
  • £860m promised to promote the use of low-carbon energy for heating buildings. This will come from general taxation rather than as a levy on consumers’ energy bills.

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